This Digest replaces an earlier version dated 11
November 2008, including some additional contextual
material
Bills Digest no. 58 2008–09
Customs Amendment (Australia-Chile Free Trade Agreement
Implementation) Bill 2008
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Contact officer & copyright details
Passage history
Customs Amendment
(Australia-Chile Free Trade Agreement Implementation) Bill
2008
Date introduced:
16 October 2008
House: Representatives
Portfolio: Home Affairs
Commencement:
Sections 1 to 3 on Royal
Assent, Schedule 1 on 1 January 2009 or when the Australia-Chile
Free Trade Agreement comes into force, whichever is the later date.
The Minister must announce by notice in the Gazette the day on
which the Agreement comes into force for Australia. If the
Agreement does not come into force in Australia the Bill does not
commence at all.
Links: The
relevant links to the Bill, Explanatory Memorandum and
second reading speech can be accessed via BillsNet, which is at
http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
To amend the
Customs Act 1901 to incorporate the new rules of origin
for goods imported into Australia from Chile so as to implement the
provisions of the Australia-Chile Free Trade Agreement.
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This Bill together with Customs Tariff
Amendment (Australia-Chile Free Trade Agreement Implementation)
Bill 2008 will amend the Customs Act 1901 and the
Customs Tariff Act 1995 to implement the
provisions of the Australia-Chile Free Trade Agreement. The former
Bill will amend the Customs Tariff Act 1995 to provide for
Free rates and preferential rates of customs duty. This Bill
proposes amendments to the Customs Act 1901 to
insert a new Division 1F of Part VIII to define the new rules of
origin for Chilean originating goods.
The reader is referred to the companion
Bills
Digest to this Bill: Customs Tariff Amendment (Australia-Chile
Free Trade Agreement Implementation) Bill 2008.[1]
Formal negotiations between Australia and
Chile to develop a free trade agreement began in February 2007.
These negotiations concluded in May 2008 and the Agreement was
signed on 30 July 2008.[2] The Agreement has not yet been ratified by
Australia.
The Regulation Impact Statement, tabled in the
Joint Standing Committee on Treaties on 17 June 2008, comments that
the highest priority of Australia s trade policy is to achieve
successful outcomes from the WTO Doha Round and [that] in this
environment many countries are pursuing the conclusion of free
trade agreements to advance their export interests.[3] Many countries have negotiated
free trade agreements (FTAs) as a means of enhancing their export
interests. Australia has negotiated a number of free trade
agreements with other countries,[4] including Agreements with Singapore, Thailand and
the United States and is currently negotiating FTAs with Japan,
China, Malaysia, ASEAN and New Zealand[5] and the Gulf Cooperation Council. A
joint non-government feasibility study commenced with the Republic
of Korea in April 2007[6], and joint feasibility studies will commence in 2008
with Indonesia and India.[7]
The World Trade Organization (WTO) deals with
the rules of trade between nations at a global or near-global
level. The WTO is an organization for liberalizing trade, a forum
for governments to negotiate trade agreements and to settle trade
disputes. The WTO developed out of negotiations between
governments.
The bulk of the WTO s current work comes from
the 1986-94 negotiations called the Uruguay Round and earlier
negotiations under the General Agreement on Tariffs and Trade
(GATT). The WTO is currently the host to new negotiations, under
the Doha Development Agenda launched in 2001.
At its heart are the WTO agreements, negotiated
and signed by the bulk of the world s trading nations. These
documents provide the legal ground-rules for international
commerce. They are essentially contracts, binding governments to
keep their trade policies within agreed limits. Although negotiated
and signed by governments, the goal is to help producers of goods
and services, exporters, and importers conduct their business,
while allowing governments to meet social and environmental
objectives.[8]
Australia is a member country and joined the
WTO on 1 January 1995.
Both Australia and Chile are members of the
Cairns Group Coalition. This Group consists of
19 agricultural exporting countries which
account for over 25 per cent of the world s agricultural exports.
During the current WTO Doha Round of negotiations the Group has
continued to push for the liberalization of trade in agricultural
exports, a cause that unites the Group across language, cultural
and geographic boundaries. Made up of developed and developing
countries across five continents, the Group is committed to
achieving free and fair trade in agriculture that provides real and
sustainable benefits for the developing world.[9]
Australia currently chairs this group, which
continues its campaign to end discrimination against agriculture in
the world trading system .[10] The Cairns Group consists of Argentina, Australia,
Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala,
Indonesia, Malaysia, New Zealand, Pakistan, Paraguay, Peru, the
Philippines, South Africa, Thailand and Uruguay.
In September 2008, the Minister for Trade
Simon Crean released the Review of
Export Policies and Programs[11] undertaken by Mr David Mortimer AO and Dr John
Edwards. The Mortimer Review was designed to review Australian
trade policies and provide a blueprint for future trade policy. The
Mortimer Review provides a chapter on FTAs, which outlines
recommendations on their use. This includes benchmarks for future
FTAs. Broadly, the issues considered in this chapter in relation to
Australia s FTAs include:
- global trends
- assessing the benefits of Australia s FTAs
- building FTAs that strengthen the multilateral trade system,
and
- benchmarks for Australia s future FTAs.[12]
The Mortimer Review states that government
should determine whether an FTA has the potential to:
- counter trade diversion or deliver substantial commercial and
wider economic benefits more quickly than would be possible through
other efforts
- be fully consistent with WTO provisions
- deliver WTO-plus outcomes in the form of liberalising
commitments that are broader and deeper than those undertaken in
the WTO
- provide for substantial liberalisation including by eliminating
virtually all tariffs and delivering new and significant access
opportunities for services and investment within a reasonable time
period
- allow, where possible, for the accession of third countries and
be consistent with the goal of regional free and open trade and
investment
- promote Australia s foreign and security policy interests.
While negotiations were initiated under the
previous Coalition government, the Australia-Chile FTA broadly
reflects the benchmarks for FTAs outlined in the Mortimer
Review.
The Minister for Trade, Hon Simon Crean when
announcing the conclusion of negotiations on the free trade
agreement said that the first FTA concluded by the Rudd Government
was the most comprehensive FTA Australia has ever negotiated.
[13] The Agreement
covers goods, services and investments.
The commitments go beyond what each country has
committed at the WTO As such, it will reinforce the contribution of
both countries to the multilateral trading system and serve as an
excellent model for other APEC economies as they work towards
deeper economic integration. [14]
It is envisaged that the Agreement will
benefit Australia s trading potential into Latin America generally.
The Australia-Chile Free Trade Agreement was signed on 30 July
2008.
Key aspects of the Agreement include:-
- Tariffs will be eliminated on 97% of existing merchandise trade
upon entry into force and 100% of existing merchandise trade in
each direction by 2015.
- Chile and Australia have locked in their liberal services and
investment regimes for each other these are WTO GATS plus
commitments.
- Suppliers of goods and services from each country will gain
guaranteed access to government procurement markets in the
other.
- Transparent, high-standard protection has been locked in for
intellectual property rights including patents, trademarks,
geographical indications and copyright. [15]
Further information on the investment
relationship with Chile, and the potential benefits for Australian
business is detailed in the National Interest Analysis tabled with
the Agreement.
Australia is the fourth largest source of
foreign direct investment in Chile with investments amounting to
approximately US$3 billion in 2007. Bilateral trade, however, with
Chile is modest ($856 million in 2007), but growing rapidly. There
is strong support for a free trade agreement (FTA) from Australian
business with an interest in Chile. The mining and energy sectors
have a particular interest, seeing enhanced opportunities in
supplying Chile s growing market for energy (coal and LNG) and
participating in Chile s buoyant mining industry (copper and gold),
including by supplying services. The meat and dairy industries
believe that an FTA would increase Australia s competitiveness in
the Chilean market and Australian services suppliers generally see
Chile as a growing market. Industry, especially but not exclusively
in those sectors, views Chile as the logical stepping stone into
other significant markets in South America, particularly Brazil.
Further, an FTA puts Australia on an equal footing with competitors
from the USA, the European Union, Canada, Japan, and New Zealand
and other Latin American countries, which currently benefit from
Chile s expansive network of preferential trade agreements
involving 54 countries.[16]
The general position under Australian law is
that treaties which Australia has joined are not directly and
automatically incorporated into Australian law. [17] To implement a treaty in order
to make its provisions or articles apply in Australian domestic
law, legislation is required. Signature and ratification do not of
themselves make treaties operate domestically. In the absence of
legislation, treaties cannot impose obligations on individuals nor
create rights in domestic law. Nevertheless, international law,
including treaty law, is a legitimate and important influence on
the development of the common law and may be used in the
interpretation of statutes. Many treaties do not require new or
prior legislation as they can be implemented through executive
action, for example trade cooperation, defence logistics and
procurement treaties. [18]
In order to implement the Australia-Chile Free
Trade Agreement, the Customs Act 1901 requires amendment
to incorporate new rules of origin for Chilean goods imported into
Australia so that they will attract preferential rates of customs
duties.
An exporter, in order to claim preferential
tariff treatment, must support the export of those goods with a
Certificate of Origin. A Certificate of Origin as defined in the
Customs Amendment (Australia-Chile Free Trade Agreement
Implementation) Bill 2008 must comply with the requirements of
Article 4.16 of the Australia-Chile Free Trade Agreement. Article
4.16 of the Free Trade Agreement provides that a claim for an
originating good to be accepted for a preferential tariff, the good
must be supported by a Certificate of Origin. The Certificate of
Origin is completed by the exporter and contains a set of minimum
requirements. The minimum requirements are listed as follows:
Exporter name and
address;
- Consignee name and address
- Marks and numbers
- Number and kind of packages
- Description of goods
- Harmonized System Code
- The applicable rule of origin
- Declaration certifying goods meet the applicable rule of
origin
- Name, title and signature of person completing the Certificate
of Origin
- Date of issue, and
- Number of Certificate of Origin.
The Certificate is to be completed in English
or Spanish and will remain valid for a period of one year from the
date it was issued. If the exporter is not the producer of the good
referred to in the Certificate of Origin, the exporter may complete
and sign the Certificate on the basis of his knowledge that the
good is an originating good or the producer s statement that the
good qualifies as an originating good.[19]
Harmonization System
The Harmonized System refers to the Harmonized
Commodity Description and Coding System established under the
International Convention on the Harmonized Commodity Description
and Coding System done at Brussels on 14 June 1983. The Convention
entered into force for Australia on 1 January 1988.
The Harmonized Commodity Description and Coding
Systems generally referred to as "Harmonized System" or simply "HS"
is a multipurpose international product nomenclature developed by
the World Customs Organization (WCO). It comprises about 5,000
commodity groups; each identified by a six digit code, arranged in
a legal and logical structure and is supported by well-defined
rules to achieve uniform classification. The system is used by more
than 200 countries and economies as a basis for their Customs
tariffs and for the collection of international trade statistics.
Over 98 % of the merchandise in international trade is classified
in terms of the HS.[20]
The Joint Standing
Committee on Treaties inquires into matters arising from treaties
and proposed treaty actions. It is also concerned with any question
relating to a treaty or other international instrument referred to
the Committee by either House or a Minister. The Committee may also
deal with such other matters referred to it by the Minister for
Foreign Affairs.[21] Discussion of matters raised in submissions to the
Joint Standing Committee on Treaties in relation to the
Australia-Chile Free Trade Agreement can be found on pp.28-35 of
Report
Number 95 on Treaties tabled on 4 June, 17 June, 25 June and 26
August 2008. The report itself was tabled on 16 October 2008 and to
date there has been no Government response issued.
The Joint Committee made the following
recommendations in relation to the Australia-Chile Free Trade
Agreement:
Recommendation 3
The Committee recommends that, prior to
commencing negotiations for bilateral or regional trade agreements,
the Government table in Parliament a document setting out its
priorities and objectives. The document should include independent
assessments of the costs and benefits. Such assessments should
consider the economic regional, social, cultural, regulatory and
environmental impacts which are expected to arise.
Recommendation 4
The Committee recommends that the Department of
Foreign Affairs and Trade undertake and publish a review of the
operation of the Australia Chile Free Trade Agreement no later than
two years after its commencement in order to assess the ongoing
relevance of concerns expressed about the Agreement, such as the
maintenance of sanitary and phytosanitary measures, impact on the
horticulture industries, intellectual property, 457 visas, and
labour and environmental standards.
Recommendation 5
The Committee supports the Australia Chile
Free Trade Agreement and recommends that binding treaty action
be taken.
The Free Trade
Agreement with Chile has been described as the first such deal with
South America and the most comprehensive in Australian and Chilean
history. [22]
It has been reported that the Chilean Minister for Foreign Affairs
and Trade, Mr Alejandro Foxley said the Agreement with Chile could
provide a bridge-head for Australia into South America because
Chile heads the union of South American nations which represents a
huge market where there is a growing middle class demanding all
sorts of things and products.[23]
Another media report stated that the Minister
for Trade, Simon Crean commented that it is important to use the
multilateral system to lay the most ambitious platform we can for
continuing trade reform at the regional and bilateral
levels.[24] He also
stressed that the Rudd government s priority is the conclusion of
the World Trade Organisation s Doha round, with a second tier
emphasis on a string of FTA talks either underway or under
consideration.[25]
Opposition Trade spokesman Ian Mcfarlane
stated that the Government has focussed more on the WTO talks to
the detriment of FTAs, saying the Rudd government has taken a
policy approach that dismisses the benefits of FTAs and compromises
the many opportunities available to Australian exporters.[26] Andrew Stoler,
Executive Director of the Institute of International Trade in the
University of Adelaide, was quoted in a media report as saying
that
assuming the ASEAN deal comes through and
assuming that one day we have deals with China, Japan, Korea, India
and Indonesia, I think Australia s got it pretty much covered FTAs
have been a useful complement to the multilateral system if we
relied on the WTO the last time, we would have had results in 1997
when we had financial services and telecommunications
liberalisation. [But] that was the last liberalising thing the WTO
has done so we ve had 11 years of nothing. [27]
The Explanatory Memorandum indicates that the
customs duty forgone as a result of implementing the Agreement will
be approximately:
- 2008-09 $1.9 million
- 2009-2012 between $4 million and $4.5 million per year.
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Schedule 1
Schedule 1 of the Bill amends Part VIII of the
Customs Act 1901 to include provisions relating to Chilean
originating goods. Item 1 inserts new
Division 1F Chilean originating goods. Proposed
subsection 153ZJC(1) provides that Chilean originating
goods are goods wholly obtained within Chile and the importer has a
Certificate of Origin for the goods.
Proposed subsection 153ZJC(2)
provides that goods are wholly obtained goods of Chile if
and only if the goods are:-
- Minerals extracted in and from the territory of Chile
- Goods listed in Section II of the Harmonized System Vegetable
products[28]
- Live animals born and raised in Chile
- Goods obtained from such live animals
- Goods obtained from hunting, trapping, fishing, gathering,
capturing or aquaculture in Chile
- Marine life taken from the high seas by Chilean registered
ships
- Goods derived from marine life harvested by Chilean registered
ships
- Goods from the seabed or beneath the seabed outside Chilean
territorial sea but taken in accordance with international law by
Chile or a person of Chile
- Waste and scrap derived from production operations in Chile,
or
- Goods obtained or produced in Chile exclusively from those
listed above.
Proposed section 153ZJD
provides that goods are Chilean originating goods if they are made
entirely in Chile from materials that originate only in Chile and
the importer of the goods has a Certificate of Origin.
Proposed subsection 153ZJE(1)
provides that goods are Chilean originating goods if they comply
with the following conditions; they are classified to a heading or
subheading of the Harmonized System set out in Schedule 1 of the
Customs (Chilean Rules of origin) Regulations 2008 (yet to be
made), they are made in Chile or Chile and Australia from
originating and non-originating goods, the goods meet the specified
requirements of the regulations and the importer has a Certificate
of Origin. This subsection is subject to the operation of
subsections (9) and (10) relating to goods sold as sets and
composite goods.
Proposed 153ZJE(2) provides
that the regulations may specify that non-originating materials
used to produce goods is required to satisfy a tariff
classification change. The regulations may also specify situations
when a non-originating material is taken to satisfy the change in
tariff classification (Proposed subsection
153ZJE(3)). The Explanatory Memorandum states that these
provisions give effect to the cumulation provision in Article 4.4
of the Agreement, which says that when a good is an originating
good of a Party and is used in the making of goods in the territory
of the other Party, then those goods shall be considered to
originate in the territory of the other Party. [29]
Proposed subsection 153ZJE(4)
provides that if there are one or more non-originating materials
that do not satisfy the change in the tariff classification
requirement stated in subsection 153ZJE(2), then the requirement is
satisfied if the total value of the non-originating goods doesn t
exceed 10% of the customs value of the goods. The regulations may
specify a regional value content of a specified percentage
(proposed subsection 253ZJE(5)). According the
Explanatory Memorandum, the method for calculating the regional
value content will be set out in the Chilean regulations.[30] Proposed
subsection 153ZJE(6) provides that if
goods are required to have a regional value content and the goods
are accompanied by accessories, spare parts, tools or instructional
materials and are not invoiced separately and the quantity and
value is customary for those goods, then the regulations must
require that the value of those accessory goods be taken into
account when working out the regional value content.
Goods that comprise a set for retail sale and
are classified according to Rule 3 of the Interpretation
Rules[31], are to
be considered as Chilean originating goods if they individually
originate in Chile or the total value of goods that do not
originate in Chile, does not exceed 25% of the customs value of the
set of goods. The regulations will specify how the value of the
goods in the set is to be worked out (proposed
subsection 153ZJE(9)). A similar
provision relates to composite goods in proposed subsection
153ZJE(10).
Proposed section 153ZJG
provides that goods are Chilean originating goods if they are
imported into Australia with accompanying accessories, spare parts,
tools or other instructional information, are invoiced together not
separately to the Chilean originating goods and the quantities and
value of the accessories etc are customary for those other goods.
Certain operations do not qualify goods to be regarded as Chilean
originating goods. Such operations include preserving goods for
storage during transport, changes to packaging, disassembly of
goods, placing goods in bottles, cases or boxes, making up sets of
goods or any combination of these processes (proposed
section 153ZJH).
Proposed section 153ZJI
provides that goods are not Chilean originating goods if they have
been transported through a country other than Chile or Australia
and have undergone subsequent production processes. This section
does not refer to goods being unloaded, reloaded, stored, repacked,
relabelled, on exhibition or necessary operations undertaken to
preserve the goods to transport them.
Part 2 of Schedule 1 deals with verification
powers. Item 2 in the Bill incorporates new
provisions into the Customs Act 1901 relating to the
export of goods to Chile from Australia. Proposed
subsection 126AKB(1) provides that regulations may
prescribe the records required to be kept concerning goods exported
to Chile from Australia and are claimed to be Australian
originating goods in order to obtain a preferential tariff in
Chile. The regulations may also impose obligations on the producer
or exporter of the goods (proposed subsection
126AKB(2).
Proposed subsection 126AKC(1)
provides that an authorised officer may require to see the records
of a person who has record keeping obligations under the
regulations. An offence may be committed under section 243SB of the
Customs Act 1901 if the person fails to produce the
records when requested, for which there is a fine of 30 penalty
units or $3300. However under existing section 243SC if the person
in producing the records would tend to incriminate him or herself
or result in further attempts to obtain evidence that would tend to
incriminate the person, the person need not comply with the
request. If the person has waived his or her rights under this
section, however, the person must comply with the requirement. To
verify a claim for preferential tariff treatment in Chile, the
authorised officer may disclose these records to a Chilean customs
official (proposed subsection 126AKC(2)).
Proposed subsection 126AKD(1)
empowers an authorised officer to ask questions of an exporter or
producer of goods exported to Chile and that are claimed to be
Australian originating goods to verify the origin of the goods.
Failing to answer such questions may be an offence under section
243SA of the Customs Act 1901 for which there is a penalty
of 30 penalty units. The self-incrimination provisions of section
243SC apply as for the previous proposed section 126AKC. An
authorised officer may disclose the answers to these questions to a
Chilean customs official to verify a claim for preferential tariff
treatment in Chile (proposed subsection
126AKD(2)).
Part 3 of Schedule 1 contains
Applications provisions. Item 3 (1)
provides that the amendment proposed in item 1 would apply to goods
imported into Australia from Chile on or after commencement and to
goods imported into Australia before the commencement of the item
where the import duty has not been worked out prior to the
commencement. Item 3(2) provides that the amendment proposed in
item 2 would apply to goods exported to Chile on or after
commencement.
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Moira Coombs
13 November 2008
Bills Digest Service
Parliamentary Library
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